If you haven’t been keeping up with the news, the House passed the Health and Economic Recovery Omnibus Emergency Solutions Act HEROES (Act) the Friday before last that will cancel up to $10,000 in student loans for all student loan borrowers and suspend all student loan payments through September 30, 2021. Don’t get your hopes too high though. Just two days later, house democrats proposed an amendment that would cut back on student loan cancelations, providing student loan relief to only the most “economically distressed borrowers”. Wondering if that applies to you? We’ll break it down.
An economically distressed borrower” is defined as someone who, as of March 12, 2020…
- Has paid $0 a month on their federal student loans under income-contingent or income-based repayment;
- Was in default on their student loans, private and/or federal (aka, 270 days past due);
- Was seriously delinquent on their private and/or federal loans (aka, 90 days past due);
- Or whose student loans were in forbearance or deferment, for reasons including economic hardship, unemployment, and cancer.
So what happens now that the House has passed the HEROES Act?
If you don’t meet any of these criteria, don’t worry, you are still eligible for student loan deferments through September 30, 2021. This suspension on student loan payment applies broadly to all student loan borrowers and is an extension of the CARES Act provision which stipulates suspended interest, payments, and involuntary collections on federal student loans. If you do meet one or more of these criteria, good news, you are still eligible for up to $10,000 in student loan cancellations.
[The HEROES Act amendment has already stirred up emotions. In a recent statement, Persis Yu, the director of NCLC’s Student Loan Borrower Assistance Project, said that scaling back student loan cancelations will negatively impact “low-income borrowers, borrowers of color, and those who lost their jobs due to the pandemic.” According to her, when the economy does reopen, “their student loan payments will likely prevent them from recovering and contributing to rebuilding our economy”.
It should be noted that the majority of student loan borrowers who are struggling financially have smaller balances. Two-thirds of student loan defaulters owe less than $10,000 in student loans, and the median debt for student loan defaulters is $9,600. By those numbers, targeted student loan cancelations would wipe out all student loan debt for the most distressed borrowers. Only time will tell.]